Hartford Equity Income Fund Delivers Solid Start to 2025 Amid Sector Rotations

The Hartford Equity Income Fund (HQIIX) began 2025 on a strong note, posting a year-to-date (YTD) return of 4.11% as of March 31, outpacing its benchmark’s 2.14% during the same period. This performance reflects the fund’s focus on dividend-paying equities and its ability to navigate sector rotations, though persistent risks and mixed long-term comparisons underscore the need for cautious optimism.

Q1 Performance Overview

The fund’s 1-year return of 9.50% outperformed its benchmark’s 7.18%, while its 10-year annualized return of 9.71% exceeded the benchmark’s 8.79%. However, the 5-year annualized return of 15.53% narrowly trailed the benchmark’s 16.15%, highlighting a slight gap in sustained momentum over that period.

Distribution Highlights

In Q1 2025, the fund distributed $0.1102 per share in ordinary income on March 27, marking a continuation of its income-focused strategy. Notably, this follows a larger distribution of $1.6444 per share in December 2024, which included capital gains. While distributions are volatile and not indicative of future payouts, the fund’s expense ratio dropped to 0.85% in early 2025 from 0.95% in 2024, enhancing net returns for investors.

Strategy and Sub-Advisory Insights

The fund’s success hinges on its strategy of investing in high-quality, dividend-growing companies with above-average yields and below-average valuations. Sub-advisor Wellington Management emphasizes valuation discipline and cross-sector collaboration, focusing on sectors like healthcare (22% of portfolio) and consumer staples (19%), which outperformed during Q1.

The fund’s defensive posture—avoiding overexposure to rate-sensitive sectors—also played a role in its relative resilience. However, its 28% allocation to financial services poses risks if interest rate volatility resurges, as banks and insurers often face pressure in such environments.

Morningstar Ratings and Risk Considerations

As of February 2025, the fund held 4 stars overall from Morningstar, a strong rating reflecting its risk-adjusted returns over 10 years. However, 3-star ratings for the 3- and 5-year periods signal modest underperformance in shorter horizons. Key risks include:
- Dividend cuts: Over 60% of the portfolio is allocated to sectors with historically volatile payouts, such as healthcare and industrials.
- Sector concentration: Large allocations to healthcare and consumer staples could amplify losses if those sectors underperform.
- Value-style cyclicality: The fund’s focus on value stocks may lag in growth-driven markets.

Conclusion

The Hartford Equity Income Fund’s Q1 2025 results underscore its effectiveness in generating income and capital appreciation in a mixed market environment. Its 4.11% YTD return, expense ratio reduction, and Morningstar accolades position it as a competitive option for income-seeking investors. However, the fund’s reliance on dividend-heavy sectors and value stocks means it remains vulnerable to sector-specific headwinds and broader economic shifts.

Long-term investors should take note of its 9.71% 10-year return, which outperforms its benchmark, but shorter-term underperformance in the 5-year period warrants caution. For now, the fund’s defensive tilt and yield-focused strategy make it a viable core holding—if investors are prepared to tolerate sector-specific volatility.

Past performance does not guarantee future results. Always review fund risks and objectives in the prospectus before investing.